Cotterell: Is DROP meant for the employee or employer? Yes

The Deferred Retirement Option Program is probably the best thing Florida legislators have done for career public employees in the past 20 years — and maybe the most misunderstood thing, too.

It’s a good deal for employees, who can pile up their pension payments while continuing to earn their salaries. It’s also good for the government, which gets to keep good employees on the job for five years or so.

The major down side is the envy DROP induces among employes who aren’t in it, as well as Floridians who wish their companies had such a plan. That was evident in a series of online comments and a few barbs in the Zing! column last week after Jeff Burlew’s story about Maj. Mike Wood retiring from the Sheriff’s Office.

He will have $504,597 in DROP and plans on coming back to work in six months as Sheriff Larry Campbell’s undersheriff. The six-month break in service is required.

Then, he plans to run for sheriff in 2016, when we’ll find out if pension envy hurts him politically.

Some commenters, presumably state employees, said the story was much ado about nothing — something any eligible Florida Retirement System member could do. It only makes news midway up in the six figures, or when a prominent public officer DROPs out — both factors in Wood’s case.

So is the misnomer “double dipper,” which we’ll hear from Wood’s opponents in two years. People who retire and come back to work are legally obtaining money that belongs to them — the state could not not pay them — but people struggling for one paycheck don’t like people who get two.

If you’re familiar with government personnel systems around here, you probably know how DROP works. It is, as the name implies, a deferred retirement plan and it’s optional — nobody has to retire on Friday and come back to work Monday.

You don’t get your monthly pension checks while working, though. Those are deposited in your DROP account, at 1.3 percent interest (6.5 percent if you joined before July 1, 2011.) When your is up — usually five years — you have to quit.

Then, you take a lump sum or roll it over, while continuing to draw your monthly pension.

This is great for the employee, who may have separately stashed some cash in deferred compensation (another good idea the state provides for employees) and some personal investments and savings. Add in Social Security and your pension — and, if you’re young enough, maybe a new job — and DROP can mean the difference between being fairly comfortable vs. just getting by.

The benefit to the taxpayers is that DROP keeps good employees who could leave. OK, bad employees can stay, too, but if they’re not doing the job they ought to be fired anyway — long before they get into the retirement zone.

Suppose your kids are grown and the house is paid for, you can afford to retire and live on Social Security and your investment earnings. If your total retirement income is $50,000 and the state is paying you $65,000 a year, you’re basically working for $15,000 — not counting various tax considerations.

The boss would like to keep you but you can afford to go. So will you stay if they escrow your pension and you keep on working? No one is irreplaceable, and they’ll have to find somebody new in five years (assuming they fill your position), but DROP is mutually beneficial in the meantime.

The agency could probably replace you with a younger worker who would earn less, but the agency would bet what it pays for.

The Office of Program Policy Analysis and Government Accountability did a report on DROP in 2010, a dozen years after it was established. OPPAGA recommended that the Legislature spell out what DROP is for.

“One perspective holds that DROP is intended to be an early retirement incentive to reduce payroll costs by encouraging older, presumably higher paid, employees to leave the workforce,” OPPAGA wrote. “In contrast, another perspective holds that DROP is intended to be a tool for retaining highly experienced employees in the workforce and avoid training and turnover costs.”

So which is it? An incentive to get older workers out of the way? Or a means of keeping them?

The Legislature hasn’t said.

It did follow OPPAGA’s advice on another point, though, reducing the 6.5 percent interest guarantee to 1.3 percent. Then-Gov. Charlie Crist vetoed the reduction in 2010 but Gov. Rick Scott signed it the next year, probably alienating thousands of state employees who weren’t going to vote Republican anyway.